November 6, 2012
The big "C" radio conglomerates may garner the lion's share of attention and headlines these days, but that doesn't bother Galaxy Communications Pres./CEO Ed Levine. Owner of clusters in Syracuse and Utica, NY, Levine is doing just fine going up against the big boys - even in this economically-challenged business climate. By staying true to his core beliefs, Levine believes his stations will continue to survive and prosper. Here he explains why...
When you first started putting together a radio station in 1978, did you ever believe you would see yourself an owner in today's radio business environment?
To be honest, no. Actually in 1978 my two roommates in college and I put a station on the air, but I didn't own any of it. I needed $10,000 to be a partner - and it could've been $10 million to me at that time. I saw firsthand the financial risks they took, and I was just a glorified worker bee. But I stayed there for eight years, and it gave me the desire to own my own station. If they could own one, so could I.
I saw ownership as a way to have some control of my life in a business that's constantly changing and that I'd have no control over. As the years went on, it made my decision to get into ownership seem smarter
Was there a time when you finally felt comfortable enough to believe that you can maintain your success in this business?
Ever since my teen years at Syracuse, I've been obsessed with the radio industry. And I came up in the programming ranks, which is unusual for an owner nowadays. I feel that's the basics our industry needs to succeed as a product.
That certainly has changed in the last 15 years, when more and more of the leaders of radio groups have been bankers masquerading as broadcasters. My background in programming gives me a comfort level where I can handle almost any situation. Things like learning to read a balance sheet and financing took some time. I've got a great group of people who work in the banking and private equity side on the team to fill in the gaps in my knowledge. So I'm proud to say that I do not pretend to be a banker. First and foremost, I am a programmer and broadcaster.
What's your take on the PPM?
The PPM is still not in Syracuse and Utica, and it will probably never be in those markets, so there's no direct impact on my stations. However, I was on Arbitron's Radio Advisory Board during the days when PPM was getting set up, and I was the only one raising my hand as far as the cost of this device. I remember sitting in one of its earliest presentations five or seven years ago, when the big stat they took out at the time was that 14-15% of the media planners would be more likely to spend more money on radio if PPM was enacted. I waited for someone to raise this question, but nobody did, so I raised my hand and asked, "Are you telling me that 85% of the media planners said there will be no difference in radio spending with the PPM?" And they said yes!
Of all the decisions the radio business made in the last 10-15 years that has made a negative impact, the PPM is certainly one of them. They made a commitment to a third-party vendor that greatly increased the costs just as we were entering into the roughest recession in the history of modern business. It was a tragic decision that cost a lot of jobs.
Are you concerned that Arbtron's focus on the PPM has diverted sufficient attention to improving the diary for everyone else?
I've always been concerned about that, to be frank, and that's why I've subscribed to Eastlan for many years, which I find superior to the diary. Having said that, with every monitoring system you'll have up books and down books, and you'll live and die by them.
Yet the PPM has been a gigantic waste of money at a time in history when the radio industry could least afford it. The bottom line is that the Arbitron guys did a much better selling job than the radio CEOs did in questioning it - and many of them are no longer in the business, leaving everyone else with the bill. Mind you, most of the Arbitron guys who were key in deploying this technology all cashed out and left the company with huge bonuses tied to its implementation. I believe the PPM has been a giant scam inflicted upon the radio industry.
What's the key to successfully competing against the radio giants such as Clear Channel and Cumulus?
Keep in mind that years ago, the fact that we were a small individual company against those two big "C" companies was a negative for us all the way around. Amazingly enough, now, being an individual, smaller station group has turned into a tremendous positive, as far as hiring and retaining employees and client relations are concerned. The promise of consolidation turned out to be a nightmare for the radio industry; as those two companies followed a business model that turned local radio stations into a national network. That makes it easier for us local broadcasters to stand out and compete.
The closer corporate radio gets to Pandora, the better it is for local companies. Look, they're welcome to use that as a business model. Our model is different, which is to be live, use local people combined with cornering the market's significant local events. We're using local personalities to drive local consumers to important local events. The operative word with all three is "local" - and it has worked very well for us.
When you're competing against voicetracked or Premium Choice talent, do you advertise the fact that you're local and, for instance, Elvis Duran is not?
To a degree, but quality wins out in the end. If your morning show is not as good as Elvis, Elvis is going to win. So we don't market against him, but we do things that he cannot do. Hopefully some of those things mean ratings and revenue through local appearances, food drives and anything like that.
But in the end, it still has to be a quality show. Only local quality can beat national quality. Just the fact that you're local, but you're not very good, you're not going to be able to win - and that's a mistake a lot of people make. The advantage is having a quality local show.
Having been a programmer, do you still maintain hands-on oversight of programming and things like airchecks?
I overlook that on a very informal level, since most of the programmers I have now are better at radio than I ever dreamed to be when I was programming. Having said that, the fact that we can talk about very specific programming moves with the morning show and the PDs help a lot in answering any questions that arise. But when it comes to directly overseeing what goes on the air, I'm significantly less involved in that than I was 10-12 years ago. I'm more into giving positive feedback. It's rare when I get really involved; when I do, I try to make it impactful.
You mentioned your emphasis on using being "local" as a competitive edge. When it comes to local events, are the more the merrier, or do you only want those that make a specific and significant impact?
Most of the large local events in our communities we either own or are partners with, starting with a big holiday event called "Lights On The Lake" in Syracuse. We also do a huge event with the Chamber of Commerce ... and we put on two of the biggest rock concerts in town. We own the largest fireworks show in Utica, then we partner with an arts festival. Galaxy has its own Events arm of our business, so we can either own or partner with entrepreneurs and civic organizations. We have our hand in almost every event in our respective markets.
Did you face competition to own or partner in all these events?
It's kind of interesting ... that in a market such as Syracuse, where we compete against Clear Channel and Cumulus stations, they won't do anything where they'll have to write a check or take a financial risk, so we pretty much own the field. In Utica, however, we compete against Townsquare, another small operator, which is a very fine business and is committed to certain local events. They do a terrific country music concert for their Country station, and a number of other events.
Our philosophy is to take out the middle men. Radio used to do events for years, such as wedding shows and such, where an outside promoter would come in and take the financial risk, allow you to hang a banner and have one of your DJs emcee the show, and you'd wind up with a $1,500 buy -- while the promoter walks away laughing with over $10,000 in his pocket. So we came up with a business model where we're the actual promoter, take the financial risk, and reap the bigger rewards. It has worked well for us, and it's been quite successful for Townsquare in Utica.
That's our secret sauce going forward - not the digital space. We're involved in digital because that's where our consumers are, but in the digital space, we're fighting entities from around the country and around the world. I don't know if I can win in that kind of battleground. I do know that I can win in the community by going out where the consumers are, touching them and feeling what they need. If we do that well, we'll be successful.
Recently, you signed up a new morning show for WKRL, which has prompted their former employer to request a temporary restraining order to prevent them from airing their show. How do you view the situation?
Cumulus is behaving extremely badly. I'd go as far as to say the Dickey brothers are the reason you want to put kids in "time out." Their behavior in this case has been abhorrent; it's as if they've created an industry of indentured servants. In this case, the morning show hosts' contracts expired on Aug 31st. Cumulus was supposed to have given Hunter & Josh 60 days' notice about renewing their contracts - which they didn't do. The hosts asked them in writing about a renewal ... and crickets. These guys are married; they have families to support, so the least you can do is give them the courtesy of a response. So they signed with us - and now Cumulus wants to prevent them from gainful employment.
I'm very happy that two judges have sided with us, Make no mistake about it; this isn't just about Hunter & Josh. This is a Cumulus employee "emancipation proclamation." You shouldn't be able to stop someone from earning a paycheck - especially after you don't want their services.
So what about Galaxy? Are you happy with where you are, station-wise, or would you like to see yourself add stations?
Very interesting question. There's a lot of inventory for sale right now. There are a couple of stations that are available in markets, frankly, I'd like to be in. I've got a great position in both markets we are in; I would rather carry out the mission here. Having said that, further down the road, I could see Galaxy become more of a southern company. But until there's some stability, as far as multiples go, we're going to be cautious.
The thing is, the motivation that's driving everything is that radio suffers from incredibly bad PR because the leadership of the major companies out there are bankers masquerading as broadcasters. Whether it's "Less Is More" or Sweetjack or whatever it is they tout as "the next great thing," it's all just B.S. Here we are, 15 years later from when the Telecom bill was passed, when everyone said it would increase radio's share from 8-10% ... well, since then it has gone down to 7%. The dream of consolidation has turned out to be an illusion for the radio industry.
Would you consider adding TV properties perhaps?
I never used to understand TV, but as the years have gone on, I see it as radio with pictures, so I may consider that down the road. Whether we're in two markets now or six markets later, that means less to me than whether we're doing a really good job. I never want to sell my soul and beliefs just for a few extra bucks. We've found that we can have good cash flow by doing a really good job as local broadcasters. That's what it's all about.